The term “logistics” appears pretty frequently in the business world, but not everyone understands what it really means.
Broadly, Logistics is:
The management of resources or products when in storage and transit. In ecommerce ventures, logistics are the processes of shipping order to customers or transporting an inventory to a merchant. The logistics process keeps a track of goods in transit and up unto the point of delivery. Logistics management is the practice of locating and identifying potential distribution and shipping companies, and evaluating their effectiveness. For most businesses it is more cost effective to outsource the logistics to a third-party company that specializes in transport and storage, and this is especially true for ecommerce ventures.
The introduction of logistics in the shipping of goods has meant a sharp decrease in goods that go missing in transit, or drivers of vehicles who decide to take a detour on their way to the destination.
The packages can be located at any point during the journey thanks to equipment in the truck or other means of transport being used. It has also improved delivery times, ensuring that customers have goods and products when they need them. The ultimate goal of logistics is to move goods from one point in the supply chain to the next in the fastest, most efficient and most cost effective manner possible.
Business logistics has transformed dramatically since the 1970s. Supply companies and supply chains have become increasingly complex due to the rise of global supply chains. This spawned the need for specialists in logistics, known as logisticians. The complexity of supply chain management only increased with the boom in technology as software was developed that aids in the movement and tracking of goods in the supply chain. While the software helps map out and track shipping routes, it has also allowed for increasing complexity in supply chains.
Logistics vs Supply Chain Management
Because Logistics, transportation, purchasing, material handling, and other business processes have continued to evolve over the years, they have become more interconnected. The procurement, warehousing, and point of origin practices associated with managing your goods are all linked in some way. Because there are so many overlaps, it’s easy for the definitions of certain terms to begin blurring together too.
Supply chain management and Logistics are sometimes used as interchangeable terms. However, while these terms do have some commonalities, they’re not the same thing.
Supply chain management is a broad umbrella concept that refers to the processes that link together to ensure that you get the products you need to your warehousing facilities, then through to the point of consumption with a competitive advantage.
Logistics apply to the movement, management, and flow of goods, services, and information within your overall supply chain.
Defining Logistics and the Supply Chain
Supply chain management refers to the collaboration between firms that connect customers, suppliers, and other partners as a means of improving efficiency and end-customer value. The Michigan State University states that supply chain managements are strategic decisions in a distribution network. Proper supply chain management set up the “operational” environment where the optimization of logistique information begins.
Logistics, on the other hand, is a component of the supply chain process. A logistics company, for instance, would plan, implement, and manage the effective forward and backwards movement of goods and services. Examining the inbound and outbound environment, logistical planning considers the activities between the point of origin for the product, and the point of consumption. The aim is to ensure that you meet your customer’s requirements with the correct logistics (and inventory management).
Logistics as an overarching concept can cover the transportation of goods, warehousing, packaging, and various other activities that position inventory. The concept started life in military science, but quickly became common in the business world as well. Whether you’re outsourcing logistics, or managing your own system, the objective is the same.
Logistics ensures that your customer receives the product they want at the right time, according to the correct demands for price and quality. Outbound and inbound logistics are both part of the consideration. While inbound logistics cover things like obtaining raw materials for a product, outbound logistics go beyond the initial purchase and storage of goods. Outbound logistics consider distribution to the customer, including fulfilling orders, managing stock, packing, and shipping.
Do Logistics and Supply Chain Management Work Together?
Although they’re not the same thing, supply chain management, and logistics processes share related information and aims. The two solutions supplement each other to ensure that products move seamlessly through warehousing, to a distributor and distribution center, to finally arrive at the final destination.
According to definitions on Wikipedia and other websites, logistics cannot exist without supply chain management, and vice versa. Notably, supply chain management is a way of linking processes within a business or network of companies into a model that drives an advantage for the business, and end-user. Logistics refers to the flow of goods, and the services or information that move in and out of an organization, from the hiring and purchase of a forklift, to the use of a United States distributor.
While the main focus of the SCM is gaining a competitive advantage, logistics is all about achieving customer satisfaction. The term “logistics” has been around for a long time, while supply chain is relatively new, but both will always be connected in your business processes.
Components of Logistics
To fully understand how retailers use logistics, and what logistics mean, it’s worth considering some of the components that are often involved in the logistics journey. For instance:
- Inbound transportation: This refers to the activities undertaken to bring specific items or supplies into a business, often from a supplier or manufacturer. It can involve all the aspects of shipping and moving equipment to a warehouse.
- Outbound transportation: These are the transportation methods used to fulfil orders on your website, or those requested by your customers. Outbound transportation involves shipping and handling in various parts of the world.
- Warehousing: This simply refers to the way that you organize the supplies and equipment that you have to serve your customers in your warehouses, or warehouses supplied by third parties. It also explains how items are managed and organized in a warehouse.
- Fleet management: Fleet management, or vehicle management (As a synonym) often refers to the transportation services that you use for inbound and outbound transportation. It can also involve tools and software used to improve efficiency in the supply chain.
- Materials handling: This is the movement, safe storage, and management of materials throughout the manufacturing, distribution, and consumption parts of retail. It can include various aspects of preparing products for customer delivery, as well as packaging.
- Order fulfillment: Order fulfillment is a broad term that refers to the process a business uses to get goods and products to the end user. Order fulfillment starts with a customer placing an order and ends when the product arrives on their doorstep.
- Inventory management: This is the technology and strategies that companies use to track the inventory they sell and process at all parts of the supply chain. Inventory can include packaging, machinery, fleets, equipment, and the products themselves. Inventory management tools help to track stock and supplies.
- Demand planning: This is a kind of predictive planning strategy that involves using technology and historical information for sales forecasting. The aim is to predict the kind of demand you might receive for products at certain times, so you don’t have to worry about having less stock than you actually need. Demand planning also ensures that you don’t have a surplus of stock you can’t move.
Why is Logistics Important?
So, what makes logistics so valuable?
The simple answer is that it’s a solution for helping companies to plan realistic and sustainable growth. No matter the size of your company, or what industry you work in, you’ll always have an ambition to grow and expand. Logistics helps you to maintain that growth, without having to deal with excessive costs and inefficient processes.
As part of the supply chain, logistics can make running your business a lot easier. Supply chains are often very complex and sensitive, as they depend on changing demands in the customer lifecycle. Because of this, a supply chain will often struggle to deliver high value if it’s not effectively organized. Logistics helps to improve the supply chain by decreasing the waste of materials and time.
With Logistics, companies can:
- Create additional value: Logistics can help retailers to create additional value, by ensuring they have the right quality and quantity of their products available to deliver to customers. Logistics mean you can manage your whole business more effectively.
- Improve efficiency: As global trade grows more popular, logistics is emerging as a crucial part of supply chains, reducing costs through effective partnerships with other businesses and providers.
- Save money: If you have a well-managed logistics strategy, there’s less risk that something will go wrong that could cost you additional money.
- Deliver better customer experiences: Logistics ensure that customers get the items that they want in a quality that they expect. With better organized logistics, businesses can respond rapidly to customer needs.
- Enhance brand reputation: Logistics show that you’ve got your business processes properly ironed out, so you can deliver the kind of amazing outcomes that your customer expects. The result is generally a better brand image, and more sales.
Satisfied customers are crucial to any business. They’re the thing that keep your company operating at its best and ensure that you can continue to make a profit. Creating satisfied customers isn’t just about finding the right price for your items or delivering great features. You should also be considering how you can effectively deliver the best experiences to your target audience too. That’s where logistics and supply chain management come in.
Now that you know more about how logistics work, you can create the kind of amazing experiences that your audience expects. The result should be better sales, more profits, and a growing business.